Archive for December, 2016

Compiled by Bryan Clagett, CMO & Investor in Geezeo, a proven white-label PFM provider for banks and credit unions, this list places me in the august company of Ron Shevlin, Jim Marous, Stessa Cohen, Brett King, Chris Skinner and seven other fintech titans largely in the United States.

A big thank you to Bryan for this recognition.

Readers would be aware that I blog and comment frequently about fintech-related topics. There are 90 posts in this blog on the topic and some more in my personal blog before I started the company blog. In addition, I’ve left over 2500 comments on Finextra. The latest five posts on fintech on this blog are as follows:

My deep involvement in finserv reflects my passion for the field and decades of experience in marketing, sales, delivery and program management of technology solutions for banking, financial services and insurance companies worldwide.

Apart from the content published in the public domain, my company develops dedicated marketing collateral for fintech solution providers. Comprising of a wide array of items like flyers, offering detail presentations, account specific point offerings and social media updates, our content can be used at various funnel stages by growth stage fintech vendors to elevate the appeal of their offerings, grow their sales pipelines, spot new revenue models, increase ticket size, shorten sales cycles and multiply returns from their technology assets in many more ways. Click here to view our Pinterest marketing collateral board.

If you clicked through to Bryan’s article, you’d have noticed his question ‘What does the “S” in “S.Ketharaman” stand for?’ and wondered the same yourself.

Humility is not my strong suit – readers and followers might have noticed my customary omission of the H from IMHO in my blog posts, comments and social media updates. However, on this occasion, I’m truly humbled to be a part of a list which includes many financial services content giants.

In case you missed it, the government of India has been aggressively pushing cashless payments recently after it demonetized the INR 500 and 1000 notes (and announced plans to introduce new design notes in INR 500, 1000 and 2000 denominations). Since payment card is the most widespread mode of cashless retail payments in India, there’s a renewed focus on stimulating the use of debit and credit cards and, not surprisingly, Merchant Discount Rate has quickly entered the policymaker’s crosshairs.

At the outset, Economic Times’ suggestion of subsidy is novel. It also sounds fair – after all, if banks and government benefit from the move to a cashless regime, they should be willing to pass on some or all of their gains to merchants and card networks.

However, given that banks and government have their own deficits to plug, what’s the guarantee that they won’t appropriate the gains from going cashless for themselves? Besides, ET bases its advice on an assumption of 2% MDR, which is only applicable for credit cards. Given that India’s central bank cum banking regulator Reserve Bank of India has set debit MDR at 0.75-1% (Source: RBI) and the fact that debit cards outnumber credit cards by 30:1 in India, it’s quite possible that the blended rate arrived at by using ET’s formula could actually exceed the statutory debit MDR.

So the subsidy option may be out.

Let’s see if we can replace it with something else.

Looks like we can. Think enforcement.

RuPay charges a fixed debit interchange of 60 paise to Issuer Bank and 30 paise to Acquirer Bank in India. Which is quite low. For the uninitiated, RuPay is a (relatively) new card network launched by National Payments Corporation of India, a wholly-owned retail payments subsidiary of RBI, which in turn is wholly-owned by the government of India. As of now, RuPay offers only a debit card that works only within India.

As against the fixed fee levied by RuPay, Indian banks – including public sector behemoths like State Bank of India – seem to be getting away by charging an ad valorem rate of as high as 2.95% for RuPay transactions.

As noted earlier, RBI has set the MDR for (non RuPay) debit transactions at 0.75-1%. However, in actual practice, the rates charged seem to be much higher.

I stumbled upon this fact when talking to a few co-workers recently about fuel surcharge on digital payments.

I’ve been using credit card for tanking up my car for ages. I’ve always noticed that my credit card statement displays a higher amount than what I pay at the pump. To take an example, I recently filled up fuel worth INR 1600. This was the figure mentioned on the chargeslip I received from the gas station and in the realtime SMS alert I got from my card issuing bank. However, when the credit card statement came a month later, I noticed that it showed a higher value of INR 1646.00 for this transaction. That means the bank has slapped an additional charge of INR 46, which works out to 2.875% on the base figure of INR 1600. The very next line was PETRO SURCHARGE WAIVER for INR 40.16. In effect, the bank – not the gas station – billed 2.875% more and refunded almost all of it back in the form of the waiver. I effectively overpaid INR 5.84 (being INR 46 – INR 40.16) for choosing a cashless mode of payment. I think it’s due to non-recoverable government taxes on the surcharge. Since the amount was small, I’ve never bothered to investigate it. (Considering that 90% of cardholders apparently never read their statements, I seem to already be investigating them a lot!)

My co-workers told me that they’re slapped a similar surcharge even when they pay for fuel by debit card. In other words, banks charge nearly 3% extra when RBI has mandated a maximum MDR of 1% for debit card.

So there’s clearly an opportunity to enforce existing MDR rates to bring down the charges.

Let me move on to working out a “fair” MDR rate.

ET recommends using the public sector card network RuPay’s calculations of cost of processing a card transaction as the baseline in arriving at a fair MDR rate.

Going by experience, forget international companies like Visa / MasterCard, it’s questionable if the legions of card issuing and card acquiring banks – even public sector banks – will accept RuPay’s version of the cost. They have different software, infrastructure and uptimes, not to mention bonuses for their honchos!

In fact, it’s questionable whether these corporations will even agree to the cost-plus method of pricing their services implied by ET.

Now, let’s assume government doesn’t bother with all the niceties and just issues a diktat to slash interchange rates. Before someone points out that governmental interventions don’t have a place in a free market like India, let me highlight two examples wherein governments of free market pantheons have mandated card interchange rates (although they did so after lengthy public consultations in those countries, but that’s a story for another day).

With the basic right of the government to intervene in this matter established, let’s see how another related mandate has been working in actual practice.

Over six months before the recent remonetization move, the Indian government had issued a diktat to its public sector undertakings to stop levying fees for accepting payments via debit card / credit card / bank transfers. However, I know at least two PSUs that continue to levy their previous fees for digital payments.

Old news. LIC & MSEB still levy surcharge on credit card payments. Talk is cheap. It's time for action! pic.twitter.com/8CQDOAowaY

For the uninitiated, payment card is a multisided business that endows incumbents with a huge “network effect” benefit.

It’s very difficult to unseat the incumbents in this business. Local card networks like Discover, JCB and MBNA have failed to make a dent on Visa and MasterCard despite trying for decades with equally compelling offerings and multicountry presence.

There’s only one notable exception to this. I’ll come to it in a bit.

Visa and MasterCard are the incumbents in the card network business virtually everywhere in the world including India. RuPay is the new kid on the block. A merely lower MDR rate won’t help RuPay fight Visa and MasterCard.

What will?

China UnionPay can offer a few lessons on that subject. It’s the only local card network to make a dent on Visa / MasterCard. It offers both debit and credit cards. While it started locally, it quickly took the battle to Visa / MasterCard’s backyard by aggressively expanding overseas.

For RuPay to make a difference, it needs to offer both debit and credit cards and operate internationally. In other words, the Indian government needs to empower NPCI to become a full-service card network with global footprint. Only then will it be able to use RuPay to keep Visa / MasterCard’s MDR in check (though not necessarily low).

—–

India already has in place the policy framework and the building blocks of competition required to drive low merchant discount rates (or at least keep them in check). What it needs now is tighter enforcement of its policies and greater empowerment of NPCI to “go ye forth and conquer” the card business globally!

Jingoism may not bother 90% of Internet users who reportedly only skim through articles and updates i.e. “consume” content. If you’re one among them, you can safely skip this blog post.

On the other hand, jingoism can harm the remaining 10% of Internet users that use digital media professionally as a part of their content marketing strategy.

If you belong to the latter cohort, welcome to this post, where I’ve outlined five ways to fight online jingoism.

#1. Mask Your Location

You can use ÜberTwitter to obfuscate your physical location in your online profiles. For example, take the following Twitter profile:

As you can see, where people generally write their country or city name, this user has entered his lat-long coordinates, so his location is not visible. This is the first time that I’ve seen someone taking this approach, whether they’ve done so to hide their location or otherwise.

Certainly, you can pluck out the two numbers and enter them in Google Maps search box to learn that this user’s location is Bangalore. However, you can use this technique to obfuscate your location well enough to ensure that you don’t become a sitting duck for jingoistic remarks.

This is not the first time I’ve come across a country-agnostic comment by one commenter (e.g. John Candido – Black Cabs – Melbourne) to be parsed / interpreted / steered by another commenter towards a specific country inferred from the former’s profile.

This is not such a big deal except when the latter is anonymous and there’s no country listed against them.

To establish a level playing field, I request @Finextra to either (A) stipulate that comments from anonymous members should not include unprovoked references to a country (hard to implement?) OR (B) mention the country of anonymous members (easier to implement?).

While I’m biased, I’ve a strong reason to believe that this technique works. More on that in a bit.

#3. Preempt The Attack

Whenever I guest blog on global media outlets, I anticipate jibes – subtle or otherwise. So, wherever possible, I preempt them by providing a multi-country exposition of the central theme of my articles. Take my Finextra post titled Secret Of Survival Of Bank Branchesfor instance.

Using an example from India, I argued in this post that banks want branches because that’s where they can sell their products most effectively. Going by past experience, there was a good chance that my post would invite comments to the effect that India needs branches because it’s backward whereas advanced nations don’t need branches because, well, they’re advanced. So, I added the following US-specific reference to reinforce my point:

HBR reinforces my belief: In its article titled Know What Your Customers Want Before They Do, the authors note, “… financial services firms find that a human being is often the best channel for delivering offers.” So, it’s not only India.

This worked. No one left a jingoistic comment.

#4. Bait And Snap

In this variant to #3, your central theme is true for both Country A (typically a developing country) and Country B (typically a developed country). While you know this, you drip-feed this information to the audience. In the first pass, you assert your point only for the developing country. If and when jingoists retort with the inevitable “what you’re saying is not true in advanced countries”, you snap back with evidence of how your point is equally applicable in developed countries!

ChasePay is a mobile payment offering from a bank and it supports instore payments in USA (Source: http://www.businesswire.com/news/home/20161019005338/en/Wakefern-Accept-Chase-Pay).

Going by the technology used by my bank in India to support instore mobile payments on its mobile payment app PayZapp, I’d hazard a guess that ChasePay works on QR code.

Hardcore jingoists will sniff out the bait and avoid making jingoistic comments. Mission accomplished. If amateur jingoists fall for it, lash out with your follow up comment in which you cite evidence that your assertion is equally true for developed countries! Like I was equipped to do with the following articles that confirm that ChasePay in USA also uses QR code for instore payments (just as PayZapp does in India):

In Omnichannel Couponing Drives CEM Success – Part 1, I’d highlighted the challenge of space in the couponing phase of a CEM program. To recap, space-related issues range from where to insert the code, how to make the code large enough to be visible but small enough to fit on the existing package through to ensuring that there’s enough space on the label to provide instructions on how to submit the code.

Subsequently, I’ve come across a few more CEM programs run by FMCG brands. The space challenge continues. In addition, time has emerged as another challenge.

Read on for illustrations of the “space-time challenge” and our suggestions for overcoming it (Spoiler Alert: No quantum mechanics knowledge required!).

#1. SNICKERS PAYTM CASHBACK

Consumer gets INR 20 cashback credited to their account by purchasing a Snickers chocolate bar costing INR 35 and paying for it with their PayTM mobile wallet.

As in the case of the Nescafe-PayTM CEM program described in Omnichannel Couponing Drives CEM Success – Part 1, the Snickers CEM program also used website-based enrollment. Unlike the Nescafe case, though, the code on the inside surface of the Snickers wrapper was easily visible since it was printed in red color on a silver background. Kudos to PayTM for continuously finding ways to enhance the customer experience.

The URL for entering the code – www.paytm.com/snickers should you be interested – was also clearly readable on the wrapper.

After entering the code and submitting it on PayTM’s microsite, I was a bit peeved to see the message that it would take 24 hours to credit the INR 20 to my PayTM wallet. But, my displeasure was short-lived. When I logged out and logged back in after a few minutes, the amount was already credited to my wallet. Not sure why PayTM needed to use this disclaimer!

Otherwise, couponing went through smoothly.

I bought another bar of Snickers and repeated the couponing process. It went through smoothly. The wrapper said “usage limitation applies” but evidently I didn’t hit it with my two purchases. This time, the amount was credited to wallet immediately.

#2. TIC TAC “SHARE & WIN”

I saw a poster of this famous mouth-freshener product last month.

I bought a pack on 24 October 2016 (you’ll know soon why the date is important). The CEM program used SMS-based couponing.

I couldn’t find the code anywhere on the box. It became visible only after I emptied the contents and tilted the pack to one side.

The number to which the code should be SMSd was printed in very small font size. I thought it was 95405 95406 or 95406 95406.

I SMSd the code to both these numbers. Nothing happened.

I Googled for “Tic Tac Share & Win” and clicked through to YouTube. Unlike the actual pack, the code was easily visible in the video.

I saw a different number on the video: 95405 95405. I SMSd the code to this number. Again, nothing happened.

I then found out that the program had expired on 30 June 2016.

I felt a bit cheated that the product carrying the program label wasn’t removed from the shelves even four months after the last date of the CEM program.

On a side note, the pack and the aforementioned promo video were both silent about what I would win from this “Share & Win” program. Combined with the lack of response to my couponing, this made me wonder if this CEM program was a scam.

#3. RELISPRAY SULTAN

Purchase of a can of this pain relief spray entered the consumer into a sweepstake for winning a free ticket for a recent Bollywood blockbuster.

In a marked departure to a typical coupon, the one on this pain relief spray was not printed on / affixed to the can. Instead, it was printed on a separate card tied to the can.

The scratch panel covering the code was of excellent quality. When I used a coin to scrape it, not a single digit of the code was defaced. I could easily read the code. This is uncommon. This program used SMS as the couponing method. It was quite easy to read the number to which the code was to be submitted.

I texted the code to the given number. Nothing happened. I didn’t bother to head over to Google this time. It seemed obvious that the program had expired, just like #2 above.

Another scam?

Although CEM has nothing to do with quantum mechanics, the above examples show that it faces the same space-time challenge!

It’s clear that quality and legibility of the coupon continue to be a major determinant for the success of a CEM program. This is an issue of space.

It’s also obvious that time is another critical success factor for CEM programs. Consumers – me included – are justified in getting exasperated with Relispray and Tic Tac leaving their couponed products on the shelves well after their respective CEM programs had expired. The negative vibe caused by this could wipe out whatever positive buzz the brands were trying to create with their CEM programs.

Getting space and time of coupons right would accelerate the mainstream adoption of CEM programs.

To overcome the time challenge, manufacturers need to predict in advance how many units of the product would sell during the duration of the CEM program and release only that quantity of the couponed products to the trade. This will ensure that negligible quantities of the couponed product would be left behind on store shelves after the program expires. If this seems like rocket science, it was – until recently. But technologies are now available that can help companies to get a good guesstimate of the CEM-driven sales uptick by correlating their historical sales data with insights drawn from other similar CEM programs.

Using a suitable CEM platform, CMOs and brand managers can overcome the space-time challenge in their CEM programs and maximize the bang for their marketing buck.